Edan Gelt - Lowering Mortgage by Getting Rid of PMI
Have you purchased a home in the last few years and put down less than 20% and are paying Private Mortgage Insurance (PMI)? If so, this is a great time to reconnect with your real estate agent or loan office to lower your mortgage payment by removing PMI.
Buyers pay approximately $30 - $70 per month in PMI per $100K borrowed. There are several ways to remove a PMI payment. The most common is through the Homeowners Protection Act (PMI Cancellation Act). This is when the principal balance is scheduled to reach 78% of the ORIGINAL value, then PMI is automatically removed. The same Act also says that the homeowner can initiate PMI removal if they hit 80% LTV ahead of schedule by making additional payments.
Here’s where a real estate agent adds values: As a market professional, a real estate agent is more aware of market value increases. In 2021 alone, median prices increased 11.1% in Illinois per data released by Illinois REALTORS(R). In some areas, home values increased as much as 30%!
If your agent or appraiser determines your home increased more than the 20% required, you will likely need to submit a written request to your lender to remove PMI and provide comps or an appraisal. If all else fails, you can determine if refinancing is a better option with a lower payment, or possibly, you will be so excited about your property value increase - you might consider selling and reinvesting.
Reach out to your Baird & Warner Real Estate Agent or Key Mortgage LO today to learn more about lowering your payment by removing PMI.